By: Ellis S.B. No. 517
A BILL TO BE ENTITLED
AN ACT
1-1 relating to authorizing targeted investments by certain retirement
1-2 systems to stimulate community development.
1-3 BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
1-4 SECTION 1. SHORT TITLE. This Act may be cited as the
1-5 Retirement Systems Targeted Investment Act.
1-6 SECTION 2. DEFINITIONS. In this Act:
1-7 (1) "Board" or "board of trustees" means the board of
1-8 trustees of a public retirement system.
1-9 (2) "Commission" means the Commission on Targeted
1-10 Investment established under Section 4 of this Act.
1-11 (3) "Community development" means creating jobs and
1-12 expanding small businesses, affordable housing, human services, and
1-13 educational opportunity in the state for the benefit of low-income
1-14 or moderate-income persons, either directly or indirectly.
1-15 (4) "Public retirement system" means the Employees
1-16 Retirement System of Texas and the Teacher Retirement System of
1-17 Texas.
1-18 (5) "Targeted investment" means an investment that
1-19 stimulates community development and that earns a market rate of
1-20 return, with or without an external source of subsidy, credit
1-21 enhancement, or risk management.
1-22 SECTION 3. TARGETED INVESTMENT AUTHORITY AND GOAL. (a) A
1-23 board may make targeted investments not exceeding 10 percent of the
2-1 total investments that the board makes each year.
2-2 (b) A board shall make a good-faith effort to achieve a
2-3 level of targeted investments of at least five percent of the total
2-4 investments that the board makes each year.
2-5 (c) When a board makes a targeted investment, it must use
2-6 the duty of care standard provided by Section 815.307, Government
2-7 Code.
2-8 (d) A board may delegate its authority under this section to
2-9 its investment manager.
2-10 SECTION 4. ESTABLISHMENT OF THE COMMISSION ON TARGETED
2-11 INVESTMENT. (a) This Act establishes a Commission on Targeted
2-12 Investment.
2-13 (b) The commission is an independent unit in the executive
2-14 branch of the state government.
2-15 (c) The purpose of the commission is to advise the board and
2-16 the state government on targeted investments.
2-17 SECTION 5. COMMISSION MEMBERSHIP. The commission consists
2-18 of 13 members as follows:
2-19 (1) the comptroller of public accounts;
2-20 (2) two members appointed by the speaker of the house
2-21 of representatives;
2-22 (3) two members appointed by the lieutenant governor;
2-23 (4) two members appointed by the board of trustees of
2-24 the Employees Retirement System of Texas, of whom:
2-25 (A) one is a member of the board; and
3-1 (B) one is a beneficiary of the Employees
3-2 Retirement System of Texas but not a member of the board;
3-3 (5) two members appointed by the board of trustees of
3-4 the Teacher Retirement System of Texas, of whom:
3-5 (A) one is a member of the board; and
3-6 (B) one is a beneficiary of the Teacher
3-7 Retirement System of Texas but not a member of the board; and
3-8 (6) four members appointed by the governor, of whom:
3-9 (A) at least two have experience in investments,
3-10 accounting, banking, insurance, or law; and
3-11 (B) at least two have experience in a community
3-12 development organization.
3-13 SECTION 6. INTERNAL PROCEDURES OF COMMISSION; TERMS;
3-14 EXPENSES. (a) The commission shall elect a chair from among its
3-15 members. The commission shall determine the times and places for
3-16 its meetings. Each member has one vote. Seven votes are necessary
3-17 for action by the commission.
3-18 (b) Except for the comptroller of public accounts, members
3-19 serve staggered terms of six years expiring on January 1 of each
3-20 odd-numbered year. A member serves on the commission until the
3-21 member's successor takes office. A member who is appointed to fill
3-22 a mid-term vacancy serves for the unexpired portion of that term.
3-23 (c) Expenses of the commission shall be paid in accordance
3-24 with appropriations made by the legislature. Members shall be
3-25 compensated for expenses only.
4-1 SECTION 7. DUTIES OF THE COMMISSION ON TARGETED INVESTMENT.
4-2 By the end of each fiscal year, the commission shall submit a
4-3 report to the board of trustees of each public retirement system,
4-4 the comptroller of public accounts, the governor, and the
4-5 legislature concerning the study and recommendations of the
4-6 commission for that retirement system. In its report the
4-7 commission shall include recommendations for strengthening the
4-8 targeted investment program of the board, including:
4-9 (1) Investment plan. A plan for the board to reach
4-10 its goal of making at least five percent of its annual investments
4-11 in targeted investments. The commission shall include in its plan:
4-12 (A) targeted investment options for the board to
4-13 consider;
4-14 (B) a role for public or private intermediaries,
4-15 which would enable the board to stimulate community development
4-16 while maintaining reasonable economies of scale;
4-17 (C) a role for subsidy or risk management
4-18 programs, which would enable the board to stimulate community
4-19 development while maintaining a market rate of return; and
4-20 (D) financial incentive options for financial
4-21 advisors based on annual growth in targeted investments, which in
4-22 the aggregate exceed the average return of the retirement system's
4-23 entire investment portfolio.
4-24 (2) Collateral benefits. Means by which the board or
4-25 other state agencies can measure the community-development and
5-1 fiscal benefits of targeted investments such as increases in the
5-2 state tax base, jobs created, and housing units built.
5-3 (3) Costs. An estimate of the costs to the public
5-4 retirement system of implementing this Act and options for
5-5 reimbursing the retirement system for these costs.
5-6 (4) Changes in law. A plan for the legislature and
5-7 the governor to change statutes and regulations in order to enable
5-8 the board to work more easily with state agencies and private
5-9 intermediaries to make targeted investments.
5-10 SECTION 8. DUTIES OF A PUBLIC RETIREMENT SYSTEM BOARD OF
5-11 TRUSTEES. (a) On a quarterly basis, a board shall provide the
5-12 commission with a report on each targeted investment.
5-13 (b) A board shall evaluate the report of the commission
5-14 prepared under Section 7 of this Act and by June 1 of each year
5-15 submit a report to the comptroller of public accounts, the
5-16 governor, and the legislature that includes:
5-17 (1) progress of the board toward meeting its goal of
5-18 making targeted investments of at least five percent of its total
5-19 investments under Section 3 of this Act, and, if the board does not
5-20 meet its goal, the board shall include an explanation of the
5-21 barriers to reaching the goal;
5-22 (2) a summary of the performance of targeted
5-23 investments including an analysis of:
5-24 (A) risk and return in comparison with other
5-25 investments of the board;
6-1 (B) diversification of the portfolio;
6-2 (C) community-development benefits; and
6-3 (D) fiscal benefits from increasing the state
6-4 tax base; and
6-5 (3) a response by which the board accepts, differs
6-6 from, or adds to each recommendation in the report of the
6-7 commission.
6-8 SECTION 9. TRANSITION. (a) The initial members appointed
6-9 to the Commission on Targeted Investment created by this Act shall
6-10 be appointed as provided by this section.
6-11 (b) The governor shall appoint two members to serve terms
6-12 expiring January 1, 1997, one member to serve a term expiring
6-13 January 1, 1999, and one member to serve a term expiring January 1,
6-14 2001.
6-15 (c) The lieutenant governor shall appoint one member to
6-16 serve a term expiring January 1, 1999, and one member to serve a
6-17 term expiring January 1, 2001.
6-18 (d) The speaker of the house of representatives shall
6-19 appoint one member to serve a term expiring January 1, 1999, and
6-20 one member to serve a term expiring January 1, 2001.
6-21 (e) The board of trustees of the Employees Retirement System
6-22 of Texas shall appoint its board member appointee to serve a term
6-23 expiring January 1, 1997, and its beneficiary member appointee to
6-24 serve a term expiring January 1, 2001.
6-25 (f) The board of trustees of the Teacher Retirement System
7-1 of Texas shall appoint its board member appointee to serve a term
7-2 expiring January 1, 1997, and its beneficiary member appointee to
7-3 serve a term expiring January 1, 1999.
7-4 SECTION 10. EFFECTIVE DATE. This Act takes effect
7-5 September 1, 1995.
7-6 SECTION 11. EMERGENCY. The importance of this legislation
7-7 and the crowded condition of the calendars in both houses create an
7-8 emergency and an imperative public necessity that the
7-9 constitutional rule requiring bills to be read on three several
7-10 days in each house be suspended, and this rule is hereby suspended.